—–Original Message—–
From: BS
Sent: Monday, October 24, 2016 1:41 PM
To: [email protected]
Subject: Giffen Goods/Veblen Goods
Hello, I am an American student attending McGill University in Canada. I am currently attending a micro Economics class and we just covered Giffen Goods. My internal logic alarm was going off when I listened to my professor talk about upward sloping demand curves. I asked her how could it be that a demand curve slopes upward if the only two variables that can change as we move along the demand curve are supply and demand AND NOT income? She responded by saying that it’s not necessarily income that we are taking into account, but the price of other goods (substitutions). Is this faulty logic still on her part? Or is my logic wrong in assuming that demand curves can only slope downward and only take into account the change in its own price and quantity?
Dear BS: First, c’mon back to the USA. All they’ve got up there in Canada, well, mainly, is “snow and socialists.” And virtually zero Austrian economists (except for Mises Institute Canada, which is not a university). Come study with me and my free enterprise Austro-libertarian colleagues at Loyola New Orleans. We’re party city! (https://www.lewrockwell.com/wp-admin/post.php?post=609073&action=edit;
https://www.lewrockwell.com/lrc-blog/nice-thank-note-come-no-enroll-loyola/) Second, what should be held constant on a demand curve is not “supply and demand” but rather EVERYTHING other than price and quantity. And, this includes not only “income” but ALSO “the price of other goods” such as substitutes (not ‘substitutions’) and complements.” Apart from these minor misstatements your “internal logic” is very correct and justified in being “alarmed” at the Giffen good – upward sloping demand curves, and your teacher. For more on the former see:
Block, Walter E. 2012. “Thymology, praxeology, demand curves, Giffen goods and diminishing marginal utility” Studia Humana; Volume 1:2, pp. 3—11 http://studiahumana.com/pliki/wydania/Thymology,%20praxeology,%20demand%20curves,%20Giffen%20goods%20and%20diminishing%20marginal%20utility.pdf
http://studiahumana.com/art,The-second-issue,Thymology-Praxeology-Demand-Curves-Giffen-Goods-and-Diminishi.html
Block, Walter E. and William Barnett, II. 2012. “Giffen Goods, Backward Bending Supply Curves, Price Controls and Praxeology; or, Who’s Afraid of the Big Bad Boogie Man of Giffen Goods and Backward Bending Supply Curves? Not Us.” Revista Procesos de Mercado, Vol. IX, No. 1, Spring, pp. 353-373
Barnett, William II and Walter E. Block. 2010. “Mises never used demand curves; was he wrong? Ignorant? No: The Antimathematicality of Demand Curves.” Dialogue, Vol. 1, pp. 23-31, March; http://www.uni-svishtov.bg/dialog/title.asp?lang=en&title=101
Barnett, William II and Walter E. Block. 2010. “Mises never used demand curves; was he wrong? Ignorant? No: The Antimathematicality of Demand Curves.” Dialogue, Vol. 1, pp. 23-31, March; http://www.uni-svishtov.bg/dialog/title.asp?lang=en&title=101
2:13 pm on October 25, 2016
